Discuss The Important Functions Of Credit.

Credit is neither capital nor it creates capital. The credit instruments only represent money and facilitate the business. The importance of credit can be judged by the following facts.
1-Large Scale Production:

The less developing countries like Pakistan are facing capital storage problem. Our production sources are limited. So credit instruments have provided the money to the industrialists. No production is on large scale and cost per unit has been reduced. The quality and quantity has been improved.

2-Increase in Saving Rate:
Credit provides an opportunity to save the money, some people save the money but they are not capable to do any business. So they lend it to the financial institutions.

3-Shifting of Capital to Productive Lands:
There are so many people who have surplus money but they are not capable to do any business. So they lend it to the financial institutions. Credit makes possible the shifting of money to those people who can use it for productivity.

4-Economy in the use of Metal:
Credit instruments are used in place of metallic coins. So there is a saving of precious metals. Future use of Credit instruments is more effective and convenient.

5-Provision of Working Capital:
Some times an industrialist faces the finance problem to purchase the raw material or for the payment of wages, so he avails the credit facility.

6-Sales of Bonds:
Some times a firm can obtain credit by selling the bonds. If the firm prospects are bright it will repay the principal amount with interest.

7-Case of Young Firm:
Credit enables the manager of a young firm to develop its resources at a rapid speed.

8-Emergency of New Businessman:
Credit makes possible the entrance of new talent in the business enterprise. If the person has all the qualities of a good entrepreneur but having no capital, Credit provides him the chance to utilise his qualities.